Correction 10:20 a.m. PST: This blog misstated the day that BP CEO Tony Hayward spoke at the conference. It is Tuesday.

WASHINGTON--Amid rumors that BP will sell its alternative-energy business, company Chief Executive Tony Hayward on Tuesday said that the current scale of the clean-tech industry will not be enough to address the world's energy challenges.

Hayward spoke at the Washington International Renewable Energy Conference (WIREC) 2008 where he called for more aggressive government policies to address both climate change and energy security, which he said were interlinked.

BP Chief Executive Tony Hayward
BP

Specifically, he said that nations need adopt a market-based mechanism, called a "cap and trade" system, to limit greenhouse gas emissions, including carbon dioxide. He also said that government "transitional" incentives are required to speed up development of clean technologies.

"Even though clean tech is growing fast, we all need to be honest," he said during a ministerial plenary session. "The scale that the industry is working at today is not going to have much impact."

He said carbon regulations should put a price on pollution. Hayward favors a cap and trade system, where polluters can trade carbon emission allowances, over a carbon tax because it is market-based and provides more "environmental certainty."

A global system, where carbon allowances are traded around the world, would be optimal. But individual countries or regions should implement their own systems and then seek to coordinate with other carbon-trading markets, a process that would mimic how financial markets evolved.

"Nobody can doubt the financial markets are now global but they grew up in individual countries," he said, noting that California has already begun the process of integrating with Europe's carbon market.

BP's primary business is oil and gas exploration but the company has been on the forefront of developing an alternative-energy business, even changing its name from British Petroleum to BP and adopting the tagline "Beyond Petroleum." It has spent $30 billion on exploration since 2001 and intends to invest another $30 billion in the next six years.

It now has a wind and solar business and is partnering with universities to develop "next-generation biofuels" that do not use food crops and are better fuels than ethanol, Hayward said.

He also said that BP is very optimistic it can make carbon capture and storage commercially viable because of its experience in oil and gas exploration. Carbon dioxide is injected underground to help oil and gas extraction.

Altogether BP spends $1 billion a year in alternative energy; the company is rumored to be looking at a sale of that business. Hayward spoke last week at an investor conference, where company watchers interpreted his comments as a signal that it may choose to focus on its core oil and gas business.

About the author

Martin LaMonica is a senior writer covering green tech and cutting-edge technologies. He joined CNET in 2002 to cover enterprise IT and Web development and was previously executive editor of IT publication InfoWorld.
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